Local gov't debts under control in China

Xinhua, June 30, 2011

?Local government investment and affordable housing construction will lift China's investment growth by 25.1 percent in 2011, the Agricultural Bank of China (ABC) said in a report on Wednesday.

According to the bank's six-month report on China's macro economy, the country's investment growth will top 25.5 percent year-on-year for the first half of 2011, while the second half may continue to see the momentum.

Hu Xinzhi, general manager of the bank's strategic planning department, said local governments' investments would be the main factor that supports the rapid investment growth in the second half of this year despite their huge debts.

Debts owed by local governments amounted to 1.07 trillion yuan (165 billion U.S. dollars) at the end of last year, according to the National Audit Office.

Hu said local government debt accounted for about one fifth of loans granted by China's banks.

"The overall risks are under control," Hu said, "as China's economy keeps expanding rapidly and the debt problem is not very serious given the robust economic growth at local levels."

Local governments will have to start construction of 6.6 million units of affordable housing in the second half of this year, thus boosting the investment growth in the property sector to a rate higher than 30 percent year-on-year for 2011, he said.

According to the ABC's report, investment from the private sector took up 58.2 percent of the country's total at the end of May.